PACRA Assigns Initial Ratings to Samba Bank Limited

The ratings reflect the bank’s very strong ownership structure. Samba is owned by The Saudi National Bank (SNB). SNB is the largest financial institution in Saudi Arabia, while having a strong lending position in the region. SNB was formed after the merger of two big banks; the National Commercial Bank and Samba Financial Group. The market cap of the bank is approx. 220bln SAR. Samba Bank intends to leverage its parental strength to penetrate into the local market. While the system share of the bank is humble, it plans profitable expansion, going forward. Lately, sizeable expansion is witnessed in deposits. The growth trajectory continued in CY22, reflecting a 33% expansion. ADR is high, though it has improved post-deposit growth. The deposit base reflects a high concentration of term deposits. The bank needs to enhance its outreach to attract a low-cost deposit base. The management has prudently recognized all infectious exposure. Consequently, there was an increase in the infection ratio (CY22: 6.5%; CY21: 5.3%). The comfort is drawn from the fact that all NPLs are provided for. The bank’s investment book is majorly vested with government securities. During CY22, the investment portfolio portrayed a sizeable decline (CY22: PKR 76.9bln; CY21: PKR 93.9bln) attributable to a change in strategy to offload securities. Also, the duration was deliberately decreased in order to minimize the risk. The sizeable improvement in the coverage of NPLs is considered positive (CY22: 115.5%; CY21: 91%). The bank’s risk absorption capacity is high: CAR is reported at 18.7% (CY21: 20.2%). The markup income witnessed an enormous increase clocking at PKR 22.5bln (CY21: PKR 13.9bln) attributable to a high contribution of markup from advances and investments. The bank recorded a net loss of PKR 428mln against the profitability of PKR 789mln during CY21. This was attributable to higher provisioning and squaring off of the bank’s position on fixed investments. During 1QCY23, the bank’s bottom line improved to PKR 280mln. The bank has a highly qualified and experienced management team to spearhead various departments. While the competitive landscape has been increasingly intensified, the bank is focused to enhance its digital footprint so that customers are provided with all "digital and online banking services". The country’s economy has gone through several varied phases in the last few years. Looking ahead, the macroeconomic landscape is fraught with numerous challenges, including macroeconomic stability, elevated interest rates, demand tightening, sizable rupee depreciation, and heightened inflation, all of which reverberate across all sectors of the economy.
Ratings are dependent on the bank's ability to sustain and improve performance parameters. Meanwhile, upholding asset quality, enhancing its share of deposits in the banking sector, adding diversity to the income stream, maintaining a cushion in CAR and a strong governance framework are critical.

About the Entity
Samba Bank Limited is majorly owned by Saudi National Bank (formerly Samba Financial Group) of Saudi Arabia. Saudi National Bank currently holds an 84.51% stake in Samba Bank Limited. The bank has a network of 47 branches (CY21: 44 branches) located in 15 major cities across the country. The board comprises nine members, including the President and CEO. The five members of the board are representatives of SNB. The bank’s President & CEO, Mr. Ahmed Tariq Azam has diversified business and leadership experience in the banking and financial services sector.